Market Recovery Drove Down Default Rate In Q1

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One of the persistent snares to housing recovery in the aftermath of the recession was broad unease in the mortgage market. The combination of plummeting home values and general loss of jobs and investment assets meant many otherwise prepared Americans were forced to default. Financial management entities curtailed their mortgage programs, and previously interested buyers were faced with both unstable property values and newfound difficulties in securing mortgages. Despite the nationwide suppression in interest rates, mortgage default remained elevated nationwide well through the opening of 2012.

That being said, it appears that the mortgage market has radically stabilized itself over the past few months. As noted in a recent Washington Post report, foreclosure rates have hit their lowest point in five years. The nationwide percentage of delinquent loans has dwindled to a new low point since the housing market crashed, and has simultaneously strengthened the long hobbled mortgage and loan sectors. The lingering backlog of troubled mortgages has begun to dissolve, ultimately removing another potential hurdle for the housing recovery. In terms of statistical specifics, the Washington Post articles details that the total percentage of mortgages with delinquent payments has dropped to a post-recession low of 7.25% in Q1.

The overall rebound in the housing sector last quarter resulted in both delinquent mortgage levels and foreclosure rates dipping close to pre-recession levels. The drop in foreclosures was most pronounced among states whose rates were most elevated throughout the past four years- with California, Nevada, and Florida most outstanding in their recovery.

This trend is ultimately unsurprising, as a dip in mortgage rates has proven to be directly tied to localized acceleration in purchase rates as well as regional climb in property values. Property throughout the West Coast – the fundamental ground zero of the housing crash – has been held as particularly toxic. That being said, data compiled since the opening of 2013 demonstrate that California property has paced an exceptional recovery. Foreclosure rates are evening out nationwide, with states that had long struggled with toxic real estate equity and high rates of default evening out and matching the rates of less hard-hit neighbor states.

So, what’s the takeaway for homeowners and investors? Primarily, it seems that market activity throughout the last three quarters has been effective in assuaging the economic ills particular to the housing market. As an economic silo, increased property purchase rates and seller confidence have worked in tandem with rising property values to not only submerge many underwater mortgages, but they have also encouraged otherwise hesitant buyers to consider putting down for a house. The internally defined property sector ailments have sloughed off with impressive quickness since consumer confidence began returning to health at the close of 2012.

However, it seems that the potential hurdles to the housing recovery now dwell primarily outside of the scope of the property sector alone. Unemployment and job security remain major hurdles, but are largely peripheral to the housing sector’s influence despite their overpowering impact on growth and stability. Ultimately, the long-term stability of the housing market will slowly begin to hinge on broader macroeconomic trends, with job growth needing to maintain forward momentum in order for an unease in the property sector to be avoided.